Most renters that want to buy a new home will often wonder when the right time is for them to start looking for a home. Ultimately it's their decision, but I certainly have some recommendations that might be helpful.
Here are a few key points that I feel all renters should understand about buying a home:
- Their first mortgage payment is usually not due until 30-60 days after closing.
- Renters should consider giving themselves some time to move out and make any desired repairs or updates to the home prior to moving out of their rental home. Also, delays sometimes occur with the home purchase process that might be outside of everyone's control, so I strongly urge buyers to consider giving themselves a "buffer zone" of time in case a delay occurs. Furthermore, all renters should consult with their landlord to find out what options they may have to extend their stay in case of unexpected delays.
- Some types of transactions, such as foreclosures and especially short sales, can take longer to close than purchasing directly from an owner that isn't in distress. Renters should consider the potential time it will take to close a transaction to avoid becoming "homeless" for a period of time or consider eliminating these seller types from their home search if a closing delay would cause significant problems.
- Despite the weak economy, homes that are in good condition are selling very quickly in many parts of D/FW, so spending a lot of time touring homes before a buyer is within a reasonable time of being able to sign a contract doesn't make much sense. Many of the best homes will quickly be gone and the best homes on the market usually require quick action on the part of a motivated buyer to compete with other buyers that may be bidding on the same home.
- Getting pre-approved for a mortgage should always be the first step before looking at homes. Mortgage guidelines have changed significantly over the last few years, and a good credit score does not always guarantee a buyer will be approved for a mortgage. Furthermore, it makes much more sense to know your options, including the expected cost of down payment and the monthly payment, before falling in love with a home that won't fit the budget.
Aside from these points to ponder, there may be other factors to consider depending on a person's individual situation.
The fact that most lenders will not require the first mortgage payment to be paid for 30-60 days after closing is often a surprise to many renters. Rent is typically paid in advance, whereas mortgage payments are typically paid one month in arrears. For example, a renter who pays their rent on March 1st is paying for their rent for the month of March, whereas a homeowner who pays their mortgage payment on March 1st is actually paying interest for the month of February. The interest for the days of the month in which a buyer closes is typically collected at closing and is part of the closing costs that are included on a lender's good faith estimate. Sometimes we can negotiate this cost to be paid by the seller, as well as some of the other closing costs. Each mortgage has its own specific set of guidelines regarding the amount of closing costs that can be paid by the seller.
Because of this 30-60 day delay from the time of closing until the first mortgage payment is due, many renters may sometimes discover they have overbudgeted for expenses. This will often allow them take some extra time to move without having to be out of their rental home on the same day as closing. Unfortunately there are sometimes delays in closings that may be completely outside the control of everyone involved, so having an extra week or two might save a renter from being temporarily "homeless" in case this happens. And regardless of that, many renters would love to enjoy a stress free move and have some time to update and make repairs to their new home before they move in. Remodeling a vacant home is much less stressful than remodeling a home full of furniture, pets and children!
Everyone's individual situation is different, so contact me today so we can design a strategy for you that will give you the best chance of making your home purchase experience a good one!